Date
23 April 2018

Top train makers CSR, CNR collide in exports rivalry

The whole railway sector, including locomotive, train and axle makers, welcomed the news that China is pushing for a “rice for high-speed railway” trade with Thailand.

China CNR Corp. (601299.CN) and CSR Corp. (01766.HK, 601766.CN), the most likely beneficiaries of such a deal, have seen their stock prices soar 9 percent and 5.5 percent respectively since last Thursday.

After Premier Li Keqiang {李克強} announced the country’s intention to jointly develop high-speed rail technology with Thailand, both companies said the Thai government was interested in their flagship high-speed train models CRH380A and CRH380BL.

The two are wasting no time in preparing to bid for the project. According to the National Business Daily, CSR Corp plans to set up a Sino-Thai High-speed Railway Technology Center, which will focus on high-speed railway research and development, technology verification, experiments and skills training.

Rival CNR Corp also has close ties with Thailand. It has been working with Thailand for more than 10 years and recently won against Germany’s Siemens AG to provide trains for Bangkok Metro.

Not long ago, the two companies have managed to avoid direct rivalry with each other. If CNR entered a bid for a project, CSR would not.

Competition between the two, however, has turned fierce following a bidding war in Argentina in June. Compared with its rivals Siemens and Bombardier as well as CNR, CSR was a newcomer to Argentina. But it walked away with 6 billion yuan worth of contracts, including subway deals, within half a year.

CNR Corp. accused CSR of cut-throat competition. In one contract worth US$514 million, CSR proposed a unit price of US$1.27 million and further lowered it to US$1.05 million, while prices offered by companies including France’s Alstom and China CNR stood at more than US$2 million per car. The contract was eventually awarded to CSR.

Overseas deals have become increasingly important for train manufacturers. Domestic orders have dried up since the deadly high-speed train accident in Wenzhou in 2011, forcing railway equipment makers to look for revenue elsewhere.

Although orders from China Railway Construction Corp. have resumed recently, exports are still regarded as an important alternative and a path to diversify business.

In fact, overseas sales accounted for over 10 percent of CNR and CSR’s revenues last year. For the first half of this year, CSR grabbed around 8 billion yuan of contracts from overseas, up 183 percent from last year and accounting for nearly a quarter of its new orders.

But up to now, CNR and CSR have focused on low-end to middle-range markets like South America and the Middle East. CSR’s aggressive price undercutting will further shrink its already thin margins.

– Contact the writer at [email protected]

CG

 

 

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